Global Automation And Infrastructure Spending Will Ignite Industrial Demand

Key Takeaways

• Faster-than-expected automation demand and immediate cost-saving impacts could drive stronger margin expansion and earnings growth than currently anticipated.
  
• Leadership in automation, global infrastructure projects, and broader market access strengthens recurring revenue and long-term prospects for shareholder returns.
  
• Growing automation, regulatory shifts, and new manufacturing technologies threaten core markets and growth, while international expansion lags and cyclical exposure increases earnings volatility.

Catalysts

Through its subsidiaries, designs, develops, manufactures, and sells welding, cutting, and brazing products in the United States and internationally.

• Analyst consensus expects moderate benefits from pricing actions and M&A integration, but with visible signs of tariff clarity and normalization of trade policy, Lincoln Electric could see a much faster and larger unlock of deferred automation demand, significantly accelerating revenue and order backlog growth, especially as customers move from quoting to order placements.
  
• While consensus sees gradual margin improvement from the acquisition of Alloy Steel and M&A, the immediate accretive impact on margins and earnings of Alloy Steel, combined with demonstrated ability to realize structural cost savings at a faster pace, points toward earlier and stronger net margin expansion than currently modeled.
  
• Global infrastructure investment is entering a sustained multi-year upcycle, and Lincoln Electric, as an industry leader, is uniquely positioned to capture high-value projects across power generation, transportation, and grid modernization, creating long-term step-changes in sales volumes and recurring consumables revenue.
  
• The structural shortage of skilled welders and the growing move toward manufacturing automation means increasing adoption of advanced, user-friendly robotics-where Lincoln Electric is already making the technology easier to deploy-will drive a rapid upward shift in product mix towards higher-margin offerings, boosting operating leverage and earnings growth.
  
• Accelerated expansion in emerging markets, coupled with a stronger position in HVAC and retail channels in the Americas, opens new addressable markets and diversifies revenue streams, which, alongside robust cash flow and proactive capital returns, sets the stage for outperformance in EPS growth and long-term shareholder returns.

Lincoln Electric Holdings Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Lincoln Electric Holdings compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Lincoln Electric Holdings's revenue will grow by 6.0% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 12.3% today to 13.7% in 3 years time.
• The bullish analysts expect earnings to reach $669.6 million (and earnings per share of $12.24) by about August 2028, up from $502.9 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 27.4x on those 2028 earnings, up from 26.5x today. This future PE is greater than the current PE for the US Machinery industry at 23.2x.
• Analysts expect the number of shares outstanding to decline by 2.63% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.17%, as per the Simply Wall St company report.

Lincoln Electric Holdings Future Earnings Per Share Growth

Risks

• The acceleration of reshoring and automation in manufacturing across Western markets threatens to reduce demand for traditional welding equipment, as Lincoln Electric's current core business is heavily centered on these products; this could result in lower equipment replacement cycles and impact future revenues.
  
• The rise of global environmental regulations targeting emissions and energy use poses a risk of customers shifting toward alternative joining techniques or materials, which may erode Lincoln Electric's arc welding solutions' competitiveness and lead to weakened overall revenue growth.
  
• Technological disruption from advancements in additive manufacturing and 3D printing could cannibalize a significant portion of industry welding needs, especially in sectors pivoting to these new technologies, pressuring Lincoln Electric's addressable market and limiting long-term top-line growth.
  
• The company's international expansion remains slower than that of peers, especially in emerging, high-growth markets such as Asia-Pacific, so persistent international volume declines and weaker trends in regions like EMEA could limit geographic diversification and constrain future revenue and earnings growth.
  
• Heavy reliance on the cyclical industrial and energy sectors leaves Lincoln Electric exposed to earnings volatility and volatile operating margins during sector downturns or prolonged slumps, making longer-term net margins and profitability vulnerable to macroeconomic and industry shocks.

Valuation

• The assumed bullish price target for Lincoln Electric Holdings is $290.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Lincoln Electric Holdings's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $290.0, and the most bearish reporting a price target of just $189.0.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $4.9 billion, earnings will come to $669.6 million, and it would be trading on a PE ratio of 27.4x, assuming you use a discount rate of 8.2%.
  
• Given the current share price of $241.31, the bullish analyst price target of $290.0 is 16.8% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.